Segmentation, Targeting Position and Competitive Advantage

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Segmentation, Targeting Position and Competitive
Advantage

• Week 5, Bus 352
• Margaret Cornish

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June 1 Objectives

• 3-step target marketing
• Bases for consumer and business segmentation
• Identifying attractive market segments
• Choosing a market coverage strategy
• Positioning
• Framework for choosing competitive advantage

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Three Steps of Target Marketing

• Segmentation distinct groups of buyers need
  different products/mix
• Targeting process of evaluating segment
  attractiveness and selecting one or more to serve
• Positioning choosing a clear, distinctive and
  desirable place, relative to competing products,
  in the mind of target consumers.

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Creative Introduction

• Team C
• Sarah Fordham
• Alison Quinton
• Bryan McIntosh
• Jen Orr

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Market Segmentation

• Levels of marketing segmentation
• Mass Marketing
• Segment marketing
• Niche marketing
• Micromarketing
• Local marketing
• Individual marketing

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Consumer Market Segmenting

• Geographic
• Demographic
• Psychographic
• Behavioral

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Consumer Market SegmentingBehavioral

• Occasions
• Benefits
• Benefit segmentation
• User Status
• Usage rate
• Loyalty status

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Consumer Market SegmentingMultiple Segmentation

• Use multiple segmentation bases to identify
  smaller, better-defined segments
• Helps to identify sub-segments within a broader
  class (eg wealthy retired) further segmented by
  income, risk preference,life-style, asset
  preference)
• Geo-demographic segmentation - linking census
  data with lifestyle patterns to refine estimates
  of market potential

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Business Market Segmenting

• Industry and company size
• Operating characteristics
• Approach to purchasing
• Situational factors
• Personal characteristics

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Business Market SegmentingBuyer characteristics

• Programmed
• Relationship
• Transactional
• Bargain hunters

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Segmenting International Markets

• Geographic, economic, political, legal, cultural
  (languages, religion, etc)
• Assumes segments should consist of clusters of
  countries

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Segmenting International Markets

• Intermarket segmentation
• Segments of consumers with similar needs and
  buying behavior but located in different
  countries
• Small farmers, yuppie teen-agers, well-to do

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Is segment worth targeting?

• Measurability
• Accessibility
• Substantiality
• Actionability

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Market TargetingIdentifying the Opportunities

• Segment size and growth
• Structure and attractiveness (competitors,
  substitutes, buyer power, supplier power)
• Company resources and objectives
• Need to be superior not just equal to
  competition only enter segment when superor can
  be delivered

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Target Market

• Target market is set of buyers who share common
  needs or characteristics the company decides to
  serve

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Selecting Market Coverage Strategy

• Undifferentiated marketing one offfer for
  entire market
• Microsoft Windows Herseys before Time Out
• Differentiated several segments several offers
  
• Concentrated - large share of one or a few
  submarkets

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Undifferentiated Marketing Benefits and Risks

• Undifferentiated marketing is lower cost narrow
  product line - lower development, production,
  inventory, transport, advertising
• Offer (mix) is best suited to largest segments
• Risk intense competition in largest segments
  combined with dissatisfaction in peripheral
  segments

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Differentiated Marketing Benefits and Risks

• Differentiated marketing is significantly higher
  cost (production, advertising etc)
• Higher total sales as offers better suited to
  each segment, should have stronger position
  within each segment
• Risk increased sales will not outweigh higher
  costs

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Concentrated Marketing Benefits and Risks

• Concentrated marketing (pursuit of a large share
  of one or a few submarkets) often used as entry
  vehicle for small new businesses.
• Achieves dominance in small segment(s) through
  greater understanding of segment consumer needs
• Risk segment attracts attention of large
  players small firm doesnt have resources to
  compete and sells out

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Market-Coverage StrategyHow do you decide

• Company resources
• Product variability spectrum
• Stage in life cycle
• Market variability
• Competitors marketing strategies

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Market Positioning

• The place the product occupies in consumers minds
  relative to the competition

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Market PositioningGOAL

• To create and occupy a space inside the target
  customers head
• Use words likely to exist in customers heads not
  ads
• Customer is reluctant to entertain changes in his
  head hence most effective positioning strategy
  demands least amount of change

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Positioning Process

• The claim - undisputable leadership in a given
  target segment
• The evidence develop evidence to make dispute
  unreasonable
• Communications identify and address right
  audiences with right sequence with right versions
  of the message
• Feedback and adjustment in response to customer
  and competitor efforts to unposition you

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Positioning Formula

• For (target customer)
• Who ( statement of need or opportunity)
• The (product name) is a (product category)
• That (statement of key benefit the compelling
  reason to buy)
• Unlike (primary competitive alternative)
• Our product (statement of primary differentiation)

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Positioning Statement

• Individually, please use the formula to write a
  position statement for the product or service
  your group has chosen
• Please dont discuss it with others in your group

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Positioning Strategies

• Marketers must plan positions to give their
  products greatest advantage in selected target
  markets
• Marketers must design marketing mixes to create
  these planned positions

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Positioning StrategiesAlternatives

• Product attributes price, performance etc
• Benefit/need satisfaction safety,taste,status
  
• Usage occasions seasonal, regular, gift
• User types frequent, gender, age
• Against a competitor Visa - Mastercard
• Away from a competitor un-cola
• For different product classes Camay

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Positioning StrategiesChoosing and Implementing

• Must build a unique bundle of competitive
  advantages that appeal to a substantial group
  within the segment

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Positioning StrategiesChoosing and Implementing

• Must build a unique bundle of competitive
  advantage(s) that appeal to a substantial group
  within the segment
• Competitive advantage over competitors via offer
  of greater value e.g. through lower price or more
  benefits to justify higher price

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How do Burger chains position themselves?

• Target segments?
• Implications for marketing mix?

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How are soft drinks segmented?

• 7 Up
• Coca Cola
• Pepsi
• Dr. Pepper
• Implications for marketing mix?

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Identifying Possible Competitive Advantages

• Could be a sustainable competitive advantage or
  many, minor ones introduced sequentially
• Company or market can be differentiated by
  product, services, personnel or image

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Competitive Advantages Product Differentiation

• Standard or optional features
• Performance
• Style and design
• Consistency, durability, repairability and
  reliability

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Competitive Advantages Service Differentiation

• Delivery speedy, convenient or careful
• Installation quality, availability
• Repair speed and convenience
• Customer training
• Consulting services
• Continuous service enhancements

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Competitive Advantages Other Sources of
Differentiation

• Personnel especially in knowledge based industry
  or labor-intensive service
• Image supported in many ways including sybmols,
  events it sponsors, packaging, distribution
  channel

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Differences How many should you promote?

• Number One positions best quality, lowest price,
  best value and most advanced technology
• If two claim to be 1, then what?
• Follower position advantages ?

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Differences Which ones to promote?

• Important highly valued
• Distinctive not currently offered
• Superior
• Communicable and visible
• Preemptive cannot be easily copied
• Affordable
• Profitable

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Finding Competitive AdvantageA Framework p. 252

• Framework for identifying the one advantage that
  it makes most sense to develop
• Identify key advantages, assess your standing and
  that of competitor on each
• Grade importance of your improving on each,
  affordability and speed of doing so and finally
  competitors ability to improve on each

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Finding Competitive AdvantageA Framework p. 252

• On each point analyze from perspective of
  customers
• When finished put into words what grid means for
  the respective offers
• Final stage identify recommended action

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Finding Competitive AdvantageA Framework p. 252

• Do this exercise for your project individually
  and then as a group - will help uncover most
  useful info
• Pay particular attention to identifying the 3-5
  critical areas of competitive advantage for your
  product (consumers perspective)

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Tonights Case Sports Drinks PowerAde and All
Sport against Gatorade

• Divide into seven groups and complete question
  assigned to your group
• Prepare transparency. Great opportunity for
  someone who wants practice in making class
  contribution

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Financial Analysis Borden Problem (1)

• Break into small groups of 4-5 people sitting
  close by to prepare answers. I will pass out
  transparencies for you to write specified
  answers.

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Research Process Review

• Define problem research objectives
• Develop research plan for collecting data
• Collect and analyze data
• Interpret and report findings

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Review Market ResearchSetting Research
Objectives

• If marketer is unable to narrow definition of
  problem satisfactorily the research objective may
  be to gather preliminary info to help define the
  problem and suggest hypotheses
• This is called exploratory research

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Review Setting Research Objectives - Descriptive

• If problem has been defined satisfactorily,
  research objective will be either descriptive or
  experimental
• If the research intended to define or describe
  things such as market potential,demographics,
  attitudes toward a product, etc
• This research objective is descriptive research

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Review Setting Research Objectives - Experimental

• If problem has been defined satisfactorily and
  the objective is to determine causal
  relationships the research objective will be
  experimental
• Hypotheses are formed and tested

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Research MethodsObservation

• As part of developing research plan, you consult
  primary and secondary sources
• Must decide on research method for gathering
  primary data. Alternative methods incl
  observational, descriptive/survey and
  experimental
• Observation is useful when info can be observed
  readily. Findings more reliable than what people
  say they do. Some behaviour difficult/impossible
  to observe

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Research Approaches

• Observation feelings, attitudes motives. Adv
  reveals what people do rather than what they say
  Limitation difficult to observe private,
  infrequent and long-term behaviour Remedy use
  in conjunction with other collection method

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Research ApproachesSurvey/Descriptive

• Survey best suited to descriptive research
  mainstream data collection used for gathering
  wide range of info in variety of situations Adv
  flexibility simplicity low-cost? Relative to
  other methods Limitations resistance
  inaccuracy difficulty in reaching target market

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Research ApproachesExperimental

• Experimental suited to gathering causal
  information (matched groups, different
  treatments, controlling for unrelated factors,
  and checking for different relships
• Adv reality/behaviour based Limitations costly
  and time-consuming

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Research Approaches Which is appropriate?

• Kellog Impact of young children on parental
  buying decision
• University Bookstore insight into how students
  feel about stores merchandise, prices and
  service
• Swiss Chalet location decision
• Gillette Will new line of deodorant for children
  be profitable?

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Research MethodsExperimental/Observational

• Impact of kids on parental buying -
  observational or experimental (to test specific
  hypothesis)
• Location decision secondary data (census data)
  primary observational (traffic counting)
• Store customer attitudes survey

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Chapters 8 9 Product and Product Development
Strategies (ex services)

• Core of Chapt 8 is decision process for
  developing product lines and mixes. Useful ground
  work for your projects
• Chapt 9 concentrates on new product development
  and life cycle strategies
• Individually prepare major case Skisailer
  (p.301)
• Skip pp 287-294